While growth is still robust across Asia, businesses are grappling with a number of challenges, including worries about rising interest rates as the Fed begins to press the brakes.
Business sentiment among Asia's top companies fell sharply in the third quarter, weighed down by worries about China's slowing economy, a possible end to the U.S. Federal Reserve's stimulus policy and a decline in the outlook for regional economic hubs like Singapore, a Thomson Reuters/INSEAD survey showed.
The Thomson Reuters/INSEAD Asia Business Sentiment Index fell to 66 in the third quarter from 74 in the previous quarter, its steepest decline in three years. A reading above 50 indicates an overall positive outlook.
Companies in India were the most positive with a maximum score of 100 for the second consecutive quarter after pro-business leader Narendra Modi was elected prime minister.
In contrast, Taiwanese businesses were the most negative, with a score of 33.
In China, business conditions had become more uncertain amid a softening real estate market.
Chinese companies polled were neutral about their prospects, which led China's score in the third quarter to drop to 50 from 67. China's economy is expected to grow 7.3 percent this year, its weakest pace in 24 years, a Reuters poll of analysts shows.
Singapore also turned in a third-quarter reading of 50, a sharp drop from the previous quarter's score of 67.
The index surveyed 200 of the Asia-Pacific region's top companies in 11 economies across sectors including financials, property, resources and technology.
The poll, conducted by Thomson Reuters in association with INSEAD, showed global economic worries, rising costs and other risks including currency volatility and regulatory uncertainty were the key business concerns.
Of the 120 companies that responded, 64 percent reported a neutral outlook, while 34 percent said they had a positive outlook and 1.67 percent were negative.
India bullish, China slops
Business sentiment in key Asian economies India and Thailand benefitted from political change.
In India, Prime Minister Modi's election has helped lift the stock market to record highs, while the end of months of political unrest in Thailand and the establishment of a military government has eased businesses concerns.
All 15 Indian firms surveyed were positive about their outlook.
Thailand was the second-most positive, with a score of 90. "The new government's affirmative and positive stand on important issues like economic policy, manufacturing reforms and easing of foreign investment norms has reaffirmed confidence in India's growth story," said Shamsher Gorawara, director of corporate communications at Mumbai-based Lupin.
Politics also helped businesses in Indonesia, Southeast Asia's largest economy, to achieve an overall positive score of 75 in the third quarter.
Indonesians recently elected President Joko Widodo, who is believed to be more business friendly than his predecessor.
Slowing growth in Asia's largest economy China, however, weakened business sentiment in the third quarter.
All companies polled from China were neutral about their outlook and most listed global economic uncertainty as their greatest risk.
Apart from China, sentiment in South Korea and Singapore also slipped to neutral from positive in the second quarter. Taiwan was the only country in the region in negative territory with a score of 33.
Sentiment in the Philippines, which had posted a maximum score of 100 in the second quarter, dropped sharply to 83 as some companies lowered their bullish views on the outlook and employment levels.
Corporate sentiment among Australian companies also fell to 75 from 79 in the second quarter, while Japan edged higher to 59 from 56.
Export-driven South Korea maintained its neutral reading of 50, the same as the second quarter.